Economists believe Canada’s latest housing sales data suggests Canadians are increasingly optimistic that interest rates may come down soon, but suggest any real estate market rebound could be short-lived.

On Wednesday, the Canadian Real Estate Association reported home sales for January jumped 22 per cent year-over-year, the largest such gain since 2021.

In a report Wednesday, Daren King, senior wealth advisor and portfolio manager with National Bank Financial, said the rebound in home sales came at a time when fixed mortgage rates have fallen.

“Furthermore, the stabilization of the Bank of Canada’s policy rate and the anticipation of an easing of monetary policy in 2024 have probably motivated some buyers to take action,” he wrote in the report.

The optimism is also reflected among homeowners, King added.

“It should be noted that the proportion of listings cancelled during the month edged down, indicating that sellers are regaining some confidence in the current market,” he said.

Marc Desormeaux, a principal economist with Desjardins, agreed that the housing numbers show Canadians believe interest rates are on the way down.

“Homebuyers may be responding to the reduction in bond rates seen earlier this year, which primarily reflected market bets that central bank policy rate cuts could come down in the months ahead,” he wrote in a report Wednesday.  

What’s next?

For King, the housing rebound could only last a few months, as Canadians still face several headwinds on the path toward home ownership.

“While this rebound, underpinned by strong population growth, may continue into the dynamic spring period, it is likely to be short-lived, given persistent affordability problems and the current slowdown in the labour market,” he said.

Desormeaux also believes improving home sales numbers are on the way.

“Sales price growth was more modest, but generally tightening supply-demand balances across multiple major markets suggest stronger gains could be coming,” he said.

Meanwhile, Clay Jarvis, a real estate financial expert with NerdWallet Canada, believes Canadians could see a busy spring for home sales.

"If five-year fixed rates stay comfortably below five per cent, buyers can expect a competitive spring market,” he wrote in a statement Wednesday. “Anyone planning a home purchase in the first half of 2024 should consider getting pre-approved before the market has a chance to really take off."

With files from The Canadian Press